Key points from the UAE's recent corporate tax guide

Businesses must remain cognisant of the corporate tax guidance specific to their operations. Antonie Robertson / The National

Increased clarity on the corporate tax preparation and filing process in the UAE was something I was keenly anticipating.

To put it in context, after gaining independence, Estonia introduced a one-page tax return for everyone. There was little technical knowledge to absorb and what excuse could you have for a form that a child could complete?

I had hoped we might get something similar (although not quite the same, as the world is different today), which would act as a launching pad for additional nuance to be added. This would allow us to ease into international normality.

Corporate tax guide CTGTXR1 was released this month by the Federal Tax Authority. The lengthy document, which has the normal warning that it is for guidance and education only, is a must read.

There cannot be a comprehensive guide for every possibility, so do not expect one. The nuances are close to infinity. What we have must be warmly welcomed. Unfortunately, for you the reader, its length means I will only be able to briefly summarise its contents.

Many hours of study await you, as you match your business’s financials to the reporting framework. Also, it is not only the quantity of screens you need to move through and complete: there are often requirements to produce and attach supporting schedules, both numerical and verbal.

You do not need to do this alone, and so do not be afraid of seeking help.

Since it is topical, let us start with elections. These are choices you get to make from a list of presented options where you choose the candidate(s) that will deliver what you want. Ballots are in many ways by their nature an act of selfishness. Why select something that will cause harm or be suboptimal in the face of a better outcome?

Coming to back to CTGTXR1, there are six options when it comes to filing returns. For the first time, all of them should be available to select. In future returns, the choices you make now may mean that they do not appear or may not appear for several years.

First up is choosing to report on a realisation basis. This deals specifically with gains or losses on the disposal of assets or when a liability is settled. Whatever direction you choose here is permanent. Yes, you may appeal to the Federal Tax Authority in the future, but the circumstances would need to be extraordinary.

Additionally, the factors impact that decision will probably evolve, so any current strategic thinking may go out of date before it can be acted on.

Next come transitional rules. These permit the exclusion of gains or losses relating to the time before your first corporate tax reporting period. However, this only applies to qualifying financial assets and liabilities.

A critical element of qualifying involves recording immovable property (think buildings and intangible assets) as well as brands on a historical cost basis (referring to the value that was paid for the asset at the time of acquisition).

After this comes the option that will apply to many small and medium enterprises in the UAE. Residents who are not in qualifying free zones or members of a multinational group, and whose revenue is below Dh3 million for the reporting period, can elect to be treated as if they derive no taxable income.

This is a limited-time transitional relief to support the SME sector and is valid only until 2026. So, mark that date.

For larger and more complicated entities, there is a special allowable asset and liability movement, as long as the group qualifies. It applies to the entity that makes the transfer and carries into the future when there are further balance sheet transfers within the qualifying group.

Next comes business restricting relief. The uniqueness here is that it involves the transfer of a business or independent part thereof to another taxable person. This is completed at par value, so no losses or gains accrue to the movement and no corporate tax is payable.

Finally comes moving a UAE resident’s foreign permanent establishment(s) from the purview of UAE corporate tax. It’s an all or nothing choice. Both revenue and costs are excluded.